: Does an expenditure from the reserve account require board approval?
Yes. Reserve accounts are given significant protections by the
Davis-Stirling Act. Associations must set up bank accounts that are
separate and distinct from their managing agent's funds
and separated into operating and reserve accounts.
Boards may not spend reserve funds for any purpose other than the
repair, restoration, replacement, or maintenance of, or litigation
involving the repair, restoration, replacement, or maintenance of, major
components that the association is obligated to repair, restore,
replace, or maintain. (Civ. Code §5510(b)
Borrowing From Reserves.
Boards are allowed to
borrow from reserves but are required to give notice of their intent to
borrow by listing it as an item in the meeting agenda. The meeting
notice must include the reason the reserve transfer is needed, some of
the options for
repayment, and whether a special assessment may be considered. If the
board authorizes the transfer, it must issue a written finding
recorded in the minutes explaining the reasons for the transfer, and
describing when and how the money will be repaid to the
reserves. (Civ. Code §5515
the signatures of at least two board members or one officer who is not
a member of the board plus a board member is required for the
withdrawal of moneys from the reserve
account. (Civ. Code §5510(a)
. Transferring funds out of a reserve account is significant and requires board approval.
: Associations needing legal assistance can contact us
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